May an Illinois gas station deduct federal gasoline taxes passed through in its fuel price from taxable gross receipts?

Plain-English summary

Illinois gas stations cannot deduct upstream federal gasoline taxes from their gross receipts when calculating Retailers' Occupation Tax merely because suppliers invoice those taxes and the stations pass the cost along in pump prices.

The Department explained that the legal incidence of federal gasoline and similar producer or wholesaler taxes is not on the consumer. A retailer that shifts the economic cost to customers is not acting as the federal tax collector. The amount is a business cost included in the price, not a separately deductible consumer tax.

The requester asked how to report the amount on Form ST-1. The Department's response gives the gross-receipts rule; it does not walk through each form line.

What this means for you

Gas-station owners

When a fuel supplier passes its federal tax cost into your invoice and you include that cost in retail prices, the Department's guidance keeps it in taxable gross receipts.

Accountants and bookkeepers

Distinguish a tax legally imposed on the customer from a supplier's cost passed through to the retailer and then recovered in the selling price. This letter addresses the second situation.

Common questions

Q: Can I subtract the federal gasoline tax shown on my supplier invoice? A: No, under this guidance. The Department says it is not deductible from retailers' gross receipts.

Q: Does passing the cost to customers change who legally owes the federal tax? A: No. Economic pass-through does not make the retailer a federal tax collector or put the tax's legal incidence on consumers.

Q: Is this letter binding on the Department?
A: No. It is a General Information Letter, which the Department says is not policy and does not bind it.

Citations and references

• 35 ILCS 120/2 (Retailers' Occupation Tax).
• 35 ILCS 105/3 (Use Tax).
• 86 Ill. Adm. Code 130.410 and 130.445 (gross receipts and federal tax costs).
• 2 Ill. Adm. Code 1200.120 (General Information Letter status).

Source

• Official index: Illinois 2026 sales-tax letters.
• Original PDF: ST 26-0032-GIL, issued August 3, 2026 and redacted August 19, 2026.

Original ruling text

ST 26-0032-GIL 08/03/2026 GROSS RECEIPTS
Federal taxes on gasoline are not deductible from gross receipts when computing retailers’ occupation tax liability because the legal incidence of these taxes is not on the consumer. See 86 Ill. Adm. Code 130.445. (This is a GIL). August 3, 2026 NAME COMPANY ADDRESS EMAIL Dear NAME: This letter is in response to your letter dated June 4, 2026, in which you requested information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning the application of a tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the topic about which they have inquired. A GIL is not a statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at https://tax.illinois.gov/ to review regulations, letter rulings and other types of information relevant to your inquiry. The nature of your inquiry and the information you have provided require that we respond with a GIL. INQUIRY: I am writing to inquire about the proper way to file the ST-1 for gas stations, specifically regarding federal taxes withheld by fuel suppliers. Fuel suppliers invoice my clients for federal taxes (approximately \$0.18 per gallon) on each invoice. My clients pass these costs on to consumers by including them in the retail price of gasoline. When remitting ST-1 sales for the month, what is the correct treatment of these federal taxes? Should they be included in gross receipts on Line 1 of the

COMPANY/NAME
Page 2
August 3, 2026
ST-1 and then deducted on Schedule A, or should they be excluded from gross receipts on Line 1 and therefore not deducted on Schedule A? DEPARTMENT’S RULING: The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in the business of selling tangible personal property at retail to purchasers for use or consumption. 35 ILCS 120/2. The Use Tax which complements the Retailers’ Occupation Tax is imposed on the privilege of using, in this State, any kind of tangible personal property that is purchased anywhere at retail from a retailer. 35 ILCS 105/3. These taxes comprise what is commonly known as “sales tax” in Illinois. In computing Retailers’ Occupation Tax liability, no deductions shall be made by a taxpayer from gross receipts or selling prices on account of the cost of property sold, the cost of materials used, labor or service costs, idle time charges, incoming freight or transportation costs, overhead costs, processing charges, clerk hire or salesmen’s commissions, interest paid by the seller, or any other expenses whatsoever. See 86 Ill. Adm. Code 130.410. Federal taxes imposed on tangible personal property when sold by a wholesaler, an importer, a manufacturer, or other producer (such as the Federal taxes on gasoline, diesel, tires, or other tangible personal property when sold by a wholesaler, an importer, a manufacturer, or other producer) are not deductible from gross receipts when computing retailers’ occupation tax liability because the legal incidence of these taxes is not on the consumer. The retailer does not, in any legal sense, act as a collector of these taxes, even though it shifts the economic burden of these taxes to the consumer. Such federal taxes are costs of doing business to the person who pays them or to persons to whom the economic burden of such taxes may be shifted by those who pay the taxes to the Federal Government. See 86 Ill. Adm. Code 130.445. I hope this information is helpful. If you require additional information, please visit our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Assistance Division at 800-732-8866. Very truly yours, Thomas Grudichak Associate Counsel TG:slc

Printed by the authority of the State of Illinois
Electronic Only - One Copy
Issued 08/03/2026, Redacted 08/19/2026